Business confidence in the South East has bucked growing gloom across the rest of the UK, a study showed today.

Firms are failing to enjoy a "Baghdad Bounce" in all but London and the South East and Northern Ireland, the report by the CBI and Experian Business Strategies said.

Wales had the biggest drop in firms' confidence with a balance of minus 38 per cent seeing weaker prospects.

Despite the end of the Iraq war, just three regions posted a rise in total orders, the survey added.

Companies also expect employment levels to fall in all but one region, with the largest decline forecast in the West Midlands, followed by the South West and Wales. The only rise is

predicted in the North West.

The CBI optimism figures show a balance of minus 16 per cent for Scotland, minus 19 in the North East, minus two in Yorkshire and the Humber, minus eight in the East Midlands, minus six in Eastern England, minus 17 in the South West, minus 24 in the West Midlands and minus 20 in the North West.

Northern Ireland grew by one per cent and optimism in the South East and London improved three per cent.

Doug Godden, the CBI's head of economic analysis, said: "Firms across the UK are struggling to keep their heads above water, with job shedding predicted in almost every region."

He called on the Bank of England to remain vigilant towards the need for a further cut in interest rates.

The only bright spot of the survey came after more than half the regions said they expected export orders to rise. Most optimistic were the North West and Wales.

A separate study by accountancy firm BDO Stoy Hayward did deliver some hope as its "poll of polls" put its optimism index - an indicator of GDP growth two quarters ahead - at 98.4, the highest level for a year.